Apparel makers prefer to keep their manufacturing activities offshore;to utilize cheap labor costs. But on the other side, the same is characterized by longer lead times, and more upfront cash investment. While retailers are expecting quick response to their orders, how good is it for an apparel makerto offshore their operations; and to what extent?


Apparel making is the engine of textile business for any country. To take advantage of low costs, apparel makers nowadays offshore their manufacturing operations. As the process moves offshore, textile industry of that country loses one of its major markets. But manufacturers seek pre-season product margins, and therefore attempt to reduce labor costs. Thus wholesale costs are a major determining factor behind a sourcing decision.


Offshoring is believed to be a win-win situation where companies minimize their overhead and diminish employee management problems through offshoring their production.The countries accepting those off shored tasks gain more labor opportunities.


Deciding whether or not to offshore the production activities can be done based on the total costs and many other factors involved in both the processes. For instance; in an apparel firm in Los Angeles where 1,500 workers are involved, the labor costs account to 3% of the apparel's retail price. But if the same process is off shored, the logistics costs may xceed the savings of low wages.


Manufacturing offshore - the unseen constraints:


A crucial step in apparel making is converting the prototype of a fashion designers creativity into a quality garment. This is not possible when the manufacturing is set offshore. Loss of product development expertise is likely to be experienced. When manufacturing process is off shored, innovative designers would have no outlet for their ideas.


The main challenge in offshoring apparel making is the availability of the garments when the particular trend is at its peak. If the shipment arrives after the fashion craze change, the company will be left with a whole stock lot of obsolete garments.


Maintaining competitiveness is vital for success in the business. Therefore retailers try to reduce inventories. They keep less stock of apparels as fashion trends tend to change at the drop of a hat. To keep pace with the consumers' rapid changing preferences, retailers keep very small apparel inventory, and expect quick delivery of products as soon as a new trend appears in the market. With off shoring process, the lead times become lengthier, and quick delivery becomes impossible.


Quick response capabilities are extremely valuable for retailers, as well as buyers. But consumers' mindset is such that, they would not prefer to pay extra pennies for the same. Therefore, manufacturer has to strike a balance between both the aspects; immediate availability of apparels at a cheaper cost.


Domestic Vs Offshoring:


Considering domestic manufacturing will not only support the same, but also reduce supply chain costs. Big orders can be fulfilled within short time since the entire supply chain activities of weaving; sewing, dyeing etc will be done downtown.


In the apparel industry, where trends are unpredictable, and volatile, long lead times can result in excess stock due to fading styles, and scarcity of garments which have hot demand. Logistics costs will further increase by the penalizing of suppliers by the retailers for late deliveries which goes up to 2% per day.


Offshoring can be done in situations where plants are near to the customers; thereby shortening the lead times. Offshore manufacturing can be considered in cases, where domestic manufacturing is more expensive, even than the offshore related supply chain costs. For instance; in the US, domestic manufacturing has become expensive. Under such circumstances offshoring becomes a valuable component. Items such as socks which have a stable demand through out the year, and are not much affected by changes in trends can be offshored. Inventory holding costs are also low for these items, thus making offshoring an attractive idea.


Apparel manufacturers, once if they are able to decide whether they should keep their production offshore or not, will achieve a competitive edge that sets them out of the box in the market.

References:


  1. Ntcresearch.org
  2. Sourcingmag.com